The open-source movement isn't communism.

Red Herring

Don't listen to Bill Gates. The open-source movement isn't communism.

This month, SAP's Shai Agassi referred to open-source software as "intellectual property socialism." In January, Bill Gates suggested that free-software developers are communists. A few years earlier, Microsoft CEO Steve Ballmer called the open-source operating system Linux "a cancer." Considering what these guys say in public, I wonder what dark words they utter in private—that al-Qaida uses open-source software to plot terrorist attacks?

The philosophy behind open-source software is simple. Instead of zealously protecting source code—the blood and guts of any computer program—open source encourages any programmer to tear apart the code and build it back up again. The theory is that this collaborative process encourages innovation and decreases bugs by increasing the number of people with a stake in the project.

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That anyone with an Internet connection can pop open the hood doesn't mean companies that use open-source programming can't make money. Red Hat does. So do Sleepycat, Sun, and many others. Ballmer and company don't object to open source because they think it's an economic loser. They can't stomach the fact that the enterprising creator has no more control over his code than any other Tom, Dick, and Harriet. Not only can more than one company rake in the dough, the other guys can alter your product any way they see fit, as long as they share these upgrades with everyone else. That's where the socialism rap comes in.

Microsoft views its source code as a trade secret. When it outsources application design to other companies, it supplies only the section of code the programmers need to accomplish their limited tasks. The company protects its programs with heavy encryption from competitors who may want to reverse-engineer it. Gates' thinking: You wouldn't expect Coca-Cola to share its recipe with Pepsi, and you shouldn't expect Microsoft to share its secret formula, either.

So far, Microsoft and its fellow travelers have held off the so-called socialists. Despite years of touchy-feely hype, the open-source movement has yet to produce a product that could go 12 rounds with Redmond on the consumer side. Mozilla Firefox has made some inroads against Internet Explorer 6, which hasn't been revamped since 2001.Butin July, Microsoft released a beta version of IE 7 to developers; a full-scale launch later this year could choke off Mozilla's hard-fought gains. And even though there are plenty of open-source office packages available (both for free and for a price), no popular alternative to Microsoft Word has emerged, either.

But open-source software isn't a failure by any means. It's everywhere and powers much of the Internet—it's just that it mostly handles the plumbing of computer systems rather than the pretty public interfaces. Open source hasn't gained a toehold on consumers' PCs because Microsoft has locked up 95 percent of that market. Capitalism, meet monopolism. But the World Wide Web is an entirely different matter.

The Web owes its existence to open source: Both the first text browser and the first graphical browser, Mosaic, were open-source projects. About 70 percent of the world's Web servers run on Apache, which powers some 50 million sites. If it weren't for free open-source software, companies like Amazon, Google, and Yahoo!—all of which run Linux—might never have got off the ground. Google, for example, uses an estimated 170,000 servers to power its search engines. If it used Microsoft Web server software—around $500 per computer in licensing fees—that would create an annual bill of about $85 million. That wouldn't put a dent in Google's budget today, but Sergey Brin and Larry Page never would have been able to start their company if they had had to pay those kinds of fees up front.

Gates, Ballmer, and Agassi say that open source is software socialism that stifles innovation. But it's the capitalists who have the tech world stuck in the mud. Microsoft's ham-fisted control over its software has done more to set back technological progress than a thousand open-source projects. When was the last time there was a truly revolutionary advance to the computer desktop that Microsoft dominates? By pocketing licensing fees, it has slowed entrepreneurship. By leveraging its monopoly over the desktop, it has prevented competitors from introducing products that would have offered an incentive for Redmond to innovate.

As Microsoft deals with Google's growing threat by looking to the Web, it has obviously taken notice of how open-source software companies do business. With the upcoming "Windows Live," Microsoft plans to earn money with advertising and by charging a premium for certain services. That's not unlike the business strategy of Sleepycat, the company behind the open-source database program Berkeley DB. One version of Berkeley DB can be downloaded for free, and programmers can modify and distribute it any way they like as long as they give away their improvements. Then there's the version that makes money. Companies that license the software—like Nasdaq, Nokia, and Cisco—maintain complete control over the source code and any improvements or revisions they make.

Sleepycat's president *, Michael Olson, told me that his company has grown at a rate of 35 percent per year since it was incorporated in 1996. (He declined to divulge the firm's revenues.) Sleepycat makes chump change compared to Microsoft, but if Bill Gates wants to compete against Google, the old way of doing business—charging hundreds of dollars for software out of the box—won't fly. Microsoft probably won't open up its software for curious programmers to monkey with. But Gates has never been against borrowing a good idea. That's one principle he and the open-source crusaders can agree on.

* Correction, November 23, 2005: This piece originally misidentified Michael Olson as the founder of the software firm Sleepycat. He is the president. Click here to return to the corrected sentence.